SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 2, 2000
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PMA Capital Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania 000-22761 23-2217932
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1735 Market Street, Suite 2800
Philadelphia, Pennsylvania 19103-7590
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(215) 665-5046
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Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
5. Other Events.
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A. On February 2, 2000, the registrant issued a news release, a copy of
which is filed as Exhibit 99.1 hereto and is incorporated herein by
reference.
B. On February 2, 2000, the registrant issued a news release, a copy of
which is filed as Exhibit 99.2 hereto and is incorporated herein by
reference.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) The exhibit accompanying this report is listed in the Index to Exhibits
on the following page.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PMA Capital Corporation
Date: February 2, 2000 By: /s/ Francis W. McDonnell
------------------------
Francis W. McDonnell,
Senior Vice President, Chief Financial
Officer and Treasurer
2
<PAGE>
Index to Exhibits
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Number Description Method of Filing
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99.1 PMA Capital Corporation Filed herewith
news release dated
February 2, 2000
99.2 PMA Capital Corporation Filed herewith
news release dated
February 2, 2000
PMA Capital
A Specialty Risk Management Company
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
- - --------------------------------------------------------------------------------
For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Announces Fourth Quarter and Full Year 1999 Results
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Full Year 1999 Operating EPS Rose 12%
-------------------------------------
Fourth Quarter 1999 Operating EPS Increased Over Fourth Quarter 1998
--------------------------------------------------------------------
Marking the Eighth Consecutive Quarter of Year-over-Year Improvement
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Philadelphia, PA, February 2, 2000 -- PMA Capital (NASDAQ: PMACA) today
announced that fourth quarter 1999 after-tax operating income (net income
excluding after-tax net realized investment gains and losses) increased 4% to
$9.0 million, compared with $8.6 million for the fourth quarter of 1998. On a
per share basis, operating income improved 6% to $0.38 per diluted share,
compared with $0.36 per diluted share for the same period last year. For the
full year 1999, after-tax operating income increased 9% to $33.4 million,
compared with $30.6 million for the same period last year. Operating income per
share for the full year 1999 improved 12% to $1.40 per diluted share up from
$1.25 per diluted share for the same period last year.
The increases in operating income for the quarter and full year 1999 reflect
solid improvement in pre-tax operating income due to better underwriting
results, as evidenced by the decline in the combined ratio. This improvement was
partially offset by a higher effective tax rate in 1999, compared with 1998. In
addition, after-tax operating income per share benefited from the favorable
effect of share repurchase activities over the past two years.
Net premiums written for the full year 1999 increased 19% to $563.5 million,
compared with $474.8 million for the same period last year.
"PMA Capital's strong financial performance in 1999 was underscored by continued
premium growth and solid underwriting performance in the fourth quarter. The
quarter's operating results improved compared with the same period last year
which marked the eighth consecutive quarter of such higher operating earnings,"
stated John W. Smithson, President and Chief Executive Officer of PMA Capital.
"I am very satisfied with the performance of each of PMA Capital's three
specialty insurance businesses. Each performed well in 1999 achieving their
operating goals despite the continued market challenges in their respective
specialty businesses. PMA Re's solid contribution to our premiums and operating
results reflects their successful product expansion during 1999, as well as
<PAGE>
their solid underwriting discipline. The improvement in operating results at The
PMA Insurance Group favorably reflects their continued strong focus on
underwriting and expense discipline. Caliber One also met with success in 1999
by achieving significant market penetration in only their second year of
operation in the excess and surplus lines business."
Net Income
- - ----------
Net income for the fourth quarter of 1999 was $6.6 million, or $0.28 per diluted
share, compared with $12.7 million, or $0.52 per diluted share, for the
comparable period of 1998. Net income for full year 1999 was $25.6 million, or
$1.08 per diluted share, compared with $44.7 million, or $1.82 per diluted
share, for the same period last year.
Included in net income for the quarter and full year of 1999 were after-tax net
realized investment losses of $2.3 million and $5.0 million, respectively,
compared with after-tax gains of $4.1 million and $14.1 million for the same
periods last year. Net realized investment losses in 1999 principally resulted
from sales of investments in 1999 in order to capitalize on higher yielding
investment opportunities.
Net income for the full year of 1999 was also impacted by an after-tax charge of
$2.8 million for the implementation of the new accounting rule for
insurance-related assessments.
PMA Re
- - ------
PMA Re reported pre-tax operating income of $12.5 million for the fourth quarter
of 1999, compared with $11.5 million for the same period last year. For the full
year of 1999, pre-tax operating income was $50.3 million, compared with $46.4
million for the same period last year. The increase in operating results for the
fourth quarter and full year of 1999 reflects an increase in investment income,
and to a lesser extent, slower growth in operating expenses relative to premium
growth.
Net premiums written were $96.4 million and $279.0 million in the fourth quarter
and full year of 1999, respectively, compared with $61.4 million and $234.0
million, respectively, for the same periods last year. Net written premiums for
the full year of 1999 reflect the expansion of finite and financial product
offerings, expanding relationships with PMA Re's existing clients, and contracts
with new clients. This increase was partially offset by the effects of the
highly competitive conditions in the U.S. reinsurance market, which has caused
PMA Re to non-renew certain accounts largely due to inadequate rates and/or
other underwriting issues.
The combined ratio, as computed using generally accepted accounting principles
(GAAP), was 102.5% for the fourth quarter of 1999, compared with 103.5% for the
same period last year. For the full year of 1999, the GAAP combined ratio was
102.5%, compared with 103.7% for the same period last year.
Net investment income was $15.1 million and $57.7 million for the fourth quarter
and full year 1999, respectively, compared with $13.8 million and $54.7 million
for the same periods last year. The 9% and 5% increases for the quarter and full
year, respectively, reflect a higher average invested asset base and higher
yields on the invested assets in 1999.
2
<PAGE>
The PMA Insurance Group
- - -----------------------
The PMA Insurance Group reported pre-tax operating income of $4.8 million for
the fourth quarter of 1999, compared with $2.1 million for the same period last
year. For the full year of 1999, pre-tax operating income was $18.2 million,
compared with $10.5 million for the same period last year. These improvements
reflect improved loss experience, reduced net exposures and lower operating
expenses, partially offset by lower investment income.
For the full year of 1999, direct workers' compensation premiums written by The
PMA Insurance Group increased 10.7% to $203.6 million, compared with $183.9
million for 1998. This increase principally reflects the successful execution of
focused marketing efforts, including efforts to shift the workers' compensation
book to relatively lower hazard classes of business.
Net premiums written were $51.2 million for the fourth quarter of 1999 and
$233.7 million for the full year of 1999, respectively, compared with $40.5
million and $234.8 million for the same periods last year. The slight decrease
in net premiums written for the full year of 1999, compared with 1998 levels,
reflects higher ceded premiums on workers' compensation business and lower
direct premiums for commercial lines other than workers' compensation, partially
offset by growth in direct workers' compensation premiums.
The GAAP combined ratio, excluding Run-off Operations (see discussion below),
was 112.3% and 113.3% for the fourth quarter and full year of 1999,
respectively, compared with 114.4% and 116.4% for the comparable periods last
year.
Net investment income, excluding Run-off Operations, decreased by $1.0 million
and $4.5 million for the fourth quarter and full year of 1999, compared with the
same periods last year, due largely to a lower invested asset base.
The PMA Insurance Group previously established run-off operations for the
purpose of reinsuring certain obligations primarily associated with workers'
compensation claims for the years 1991 and prior (the "Run-off Operations"). For
the fourth quarter and full year of 1999, Run-off Operations had pre-tax
operating income of $131,000 and pre-tax operating losses of $189,000,
respectively, compared with pre-tax operating income of $411,000 and $452,000
for the same periods last year.
Caliber One
- - -----------
Caliber One commenced writing excess and surplus lines business in January 1998.
As a result of the start-up nature of this operation, losses and expenses have
exceeded revenues throughout much of the company's first two years of existence.
However, throughout 1999, Caliber One's premium base and investment income
increased, which contributed to its $83,000 pre-tax operating profit for the
full year of 1999. Caliber One had a pre-tax operating loss of $1.6 million for
the full year of 1998.
Caliber One's net premiums written have grown each quarter in 1999 culminating
in $51.2 million of net written premiums for the full year of 1999, with $20.6
million generated in the fourth quarter. Net written premiums were $3.9 million
and $6.4 million for the fourth quarter and full year of 1998, respectively.
Caliber One's GAAP combined ratio for 1999 was 109.6%.
3
<PAGE>
Corporate and Other
- - -------------------
The Corporate and Other segment includes unallocated investment income and
expenses, including debt service, as well as the results of certain of the
Company's real estate properties. For the fourth quarters of 1999 and 1998,
pre-tax operating losses for this segment were $4.5 million and $2.7 million,
respectively. For the years 1999 and 1998, pre-tax operating losses were $20.8
million and $21.9 million, respectively. The fourth quarter and full year of
1998 benefited from lower net losses from non-core real estate operations. This
was more than offset by lower interest expense for the full year of 1999 due to
the $40 million reduction in outstanding debt in the fourth quarter of 1998.
Financial Position
- - ------------------
Total assets were $3.2 billion as of December 31, 1999, compared with $3.5
billion as of December 31, 1998. Shareholders' equity was $429.1 million as of
December 31, 1999, compared with $511.5 million as of December 31, 1998. The
decrease in shareholders' equity reflects a $76.9 million reduction in after-tax
unrealized appreciation on invested assets primarily resulting from an increase
in interest rates since year-end 1998, which has decreased the fair value of
fixed maturity investments.
Book value per share, excluding unrealized gains and losses, was $21.22 as of
December 31, 1999, compared with $20.61 as of December 31, 1998.
Share Repurchase Plan
- - ---------------------
During 1999, PMA Capital repurchased 1.5 million shares of its Class A Common
Stock at a cost of approximately $30.2 million (average per share price was
$19.81). Since the inception of its share repurchase program in February 1998,
PMA Capital has repurchased a total of 2.5 million shares at a total cost of
$49.1 million (average per share price was $19.45).
As of February 2, 2000, the remaining share repurchase authorization is
approximately $25.9 million.
Quarterly Dividends
- - -------------------
On February 2, 2000, PMA Capital's Board of Directors declared regular quarterly
dividends on its Class A Common Stock of $0.09 per share and on its Common Stock
of $0.08 per share to shareholders of record on March 13, 2000. The dividends
will be paid on April 1, 2000. PMA Capital has paid consecutive quarterly
dividends to its shareholders for the past 83 years.
4
<PAGE>
PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company, whose operating subsidiaries provide specialty risk
management products and services to customers throughout the United States. The
primary product lines of PMA Capital's subsidiaries include: 1) property and
casualty reinsurance, underwritten and marketed through PMA Re; 2) managed care
workers' compensation, integrated disability and other commercial property and
casualty lines of insurance in the Mid-Atlantic and Southern regions of the
United States, underwritten and marketed under the trade name The PMA Insurance
Group; and 3) excess and surplus lines coverages, underwritten and marketed by
Caliber One.
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this release and oral statements made by individuals
authorized to speak on behalf of PMA Capital Corporation (the "Company") that
are not historical facts are forward-looking statements and are based on
estimates, assumptions and projections. Actual results may differ materially
from those projected in the forward-looking statements. These forward-looking
statements are based on currently available financial, competitive and economic
data and the Company's current operating plans based on assumptions regarding
future events. The Company's actual results could differ materially from those
expected by the Company's management. The factors that could cause actual
results to vary materially, some of which are described with the forward-looking
statements, include, but are not limited to, changes in general economic
conditions, including the performance of financial markets and interest rates;
regulatory or tax changes, including changes in risk-based capital or other
regulatory standards that affect the ability of the Company to conduct its
business; competitive or regulatory changes that affect the cost of or demand
for the Company's products; the Company's ability to meet its marketing
objectives; the effect of changes in workers' compensation statutes and their
administration; the Company's ability to predict and effectively manage claims
related to insurance and reinsurance policies; reliance on key management;
adequacy of reserves for claim liabilities; adverse property and casualty loss
development for events the Company insured in prior years; adequacy and
collectibility of reinsurance purchased by the Company; severity of natural
disasters and other catastrophes; and other factors disclosed from time to time
in reports filed by the Company with the Securities and Exchange Commission.
Investors should not place undue reliance on any such forward-looking
statements. The Company disclaims any obligation to update forward-looking
information.
5
<PAGE>
PMA Capital Corporation
Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Dec. 31, Twelve months ended Dec. 31,
Income Statement Data: 1999 1998 1999 1998
- - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net premiums written:
PMA Re $ 96,370 $ 61,415 $ 278,998 $ 234,010
The PMA Insurance Group 51,241 40,506 233,713 234,837
Caliber One 20,556 3,859 51,237 6,436
Corporate and other (75) (153) (438) (522)
------------------------------------------------------------------------
Consolidated $ 168,092 $ 105,627 $ 563,510 $ 474,761
========================================================================
Revenues:
Net premiums earned:
PMA Re (1) $ 102,573 $ 66,206 $ 293,862 $ 223,559
The PMA Insurance Group 60,518 63,950 221,934 241,928
Caliber One 10,189 1,119 24,729 1,750
Corporate and other (75) (153) (438) (522)
------------------------------------------------------------------------
Consolidated Net premiums earned 173,205 131,122 540,087 466,715
Net Investment Income 27,958 27,865 110,057 120,125
Realized Gains (Losses) (3,584) 6,383 (7,745) 21,745
Other Revenues 3,890 5,511 12,718 14,896
------------------------------------------------------------------------
Consolidated Revenues $ 201,469 $ 170,881 $ 655,117 $ 623,481
========================================================================
Components of operating income (loss) (2):
PMA Re $ 12,529 $ 11,526 $ 50,319 $ 46,408
The PMA Insurance Group 4,801 2,086 18,200 10,470
Caliber One 922 (289) 83 (1,606)
Corporate and other (4,473) (2,737) (20,765) (21,948)
------------------------------------------------------------------------
Pre-tax operating income $ 13,779 $ 10,586 $ 47,837 $ 33,324
========================================================================
After-tax operating income $ 8,956 $ 8,588 $ 33,387 $ 30,600
========================================================================
Net income $ 6,627 $ 12,737 $ 25,594 $ 44,734
========================================================================
Weighted Average Common Shares Outstanding:
Basic 22,611,354 23,324,466 22,975,613 23,608,618
Diluted 23,388,741 24,178,280 23,785,203 24,524,888
After-tax Operating Income Per Share:
Basic $ 0.40 $ 0.37 $ 1.45 $ 1.30
========================================================================
Diluted $ 0.38 $ 0.36 $ 1.40 $ 1.25
========================================================================
Net Income Per Share:
Basic $ 0.29 $ 0.54 $ 1.11 $ 1.89
========================================================================
Diluted $ 0.28 $ 0.52 $ 1.08 $ 1.82
========================================================================
Balance Sheet Data: December 31, 1999 December 31, 1998
------------------------------------------------- ----------------- -----------------
Total Assets $ 3,245,372 $ 3,460,718
Shareholders' Equity $ 429,143 $ 511,480
Shareholders' Equity per Share (including FAS 115) $ 19.21 $ 21.90
Shareholders' Equity per Share (excluding FAS 115) $ 21.22 $ 20.61
<FN>
(1) PMA Re's earned premiums for the full year of 1999 include approximately $32
million, reflecting a revision in the estimate of unearned premiums on in-force
contracts.
(2) Pre-tax operating income (loss) represents pre-tax income (loss) from
continuing operations, but excluding net realized investment gains (losses).
After-tax operating income (loss) is net income (loss) excluding after-tax net
realized investment gains (losses).
</FN>
</TABLE>
6
PMA Capital
A Specialty Risk Management Company
Mellon Bank Center Suite 2800
1735 Market Street
Philadelphia, PA 19103-7590 PRESS RELEASE
- - --------------------------------------------------------------------------------
For Release: Immediate
Contact: Albert D. Ciavardelli
(215) 665-5063
PMA Capital Corporation Announces
---------------------------------
Date of Annual Shareholders Meeting and
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Proposals for Shareholder Action
--------------------------------
Philadelphia, PA, February 2, 2000 - PMA Capital Corporation (NASDAQ: PMACA)
today announced that the 2000 Annual Meeting of Shareholders will be held at
9:00 a.m. Eastern Standard Time on Monday, April 24, 2000, at 380 Sentry
Parkway, Blue Bell, PA. The record date for determining shareholders entitled to
vote at the Annual Meeting will be March 6, 2000.
The Board of Directors approved the following proposals to be presented to the
shareholders at the Annual Meeting:
1. Election of four directors (Messrs. Frederick W. Anton III, Joseph H.
Foster, James F. Malone III and L.J. Rowell, Jr.) to serve until 2003.
2. Approval of an amendment to the Company's Amended and Restated
Articles of Incorporation to reclassify and convert each issued share
of the Company's Common Stock into one share of Class A Common Stock.
3. Approval of an amendment to the Company's Amended and Restated
Articles of Incorporation to authorize two million shares of
undesignated Preferred Stock, $0.01 par value per share, and to
authorize the Board, without further shareholder approval, to
designate one or more series of Preferred Stock, with rights and
privileges as the Board may determine.
4. Approval of the PMA Capital Corporation Annual Incentive Plan.
5. Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent auditors for the year ending December 31, 2000.
The Board's approval of Proposals 2 and 3 is conditioned upon shareholder
approval of both of the Proposals at the Annual Meeting. Proposal 2 will require
the affirmative class vote of two-thirds of the outstanding shares of Common
Stock, and the combined vote of a majority of the outstanding shares of Common
and Class A Common Stock. Proposal 3 will require the affirmative vote of a
majority of the outstanding shares of Common and Class A Common Stock, each
voting separately as a class.
<PAGE>
Members of the Board of Directors, executive officers and PMA Foundation own in
the aggregate approximately 7.30 million shares of Common Stock and
approximately 2.49 million shares of Class A Common Stock as of December 31,
1999, representing 55% of the voting power of the Company's outstanding capital
stock and intend to vote in favor of all of the above proposals. As of December
31, 1999, the Company had outstanding approximately 12.65 million shares of
Common Stock and approximately 9.69 million shares of Class A Common Stock.
If the proposals are adopted, members of the Board of Directors, executive
officers and PMA Foundation will continue to own in the aggregate approximately
9.79 million shares of Class A Common Stock representing 44% of the outstanding
shares and voting power of the Company's capital stock.
The Company believes that the reclassification and conversion of Common Stock to
Class A Common Stock will simplify the Company's capital structure and may,
among other things, create a more liquid trading market for the Class A Common
Stock. However, the Company cannot predict what effect the reclassification
amendment will have on the trading volume or market price of the Class A Common
Stock.
The Company has no present plan to issue any shares of preferred stock if
Proposals 2 and 3 are approved. If these proposals are approved, the Board of
Directors intends to adopt a shareholder rights plan at its next regularly
scheduled meeting in May 2000.
This press release contains forward-looking statements. In addition to the
cautionary statements set forth with the forward-looking statements, readers
should evaluate the forward-looking statements in this press release with the
cautionary statements contained in the Company's 1998 Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K, which are incorporated by
reference in this press release. The Company disclaims any obligation to update
forward-looking information.
Important Notice:
- - -----------------
All shareholders of the Company are urged to read the Company's proxy statement
relating to the 2000 Annual Meeting when it is available because it will contain
important information about the proposals described in this press release. The
Company intends to mail its definitive proxy statement to holders of record
sometime during the last two weeks of March. At the same time, the Company's
preliminary and definitive proxy statements, and any other relevant documents,
will be available for free at the Securities and Exchange Commission's website
(www.sec.gov). Further, when they are available, the Company's notice of
meeting, proxy statement and 1999 Annual Report will be available for free from
the Company by contacting Albert D. Ciavardelli, Vice President--Finance at
215-665-5063.
The proposals described in this press release are management proposals, and the
participants in the solicitation relating to these proposals include the current
directors, nominees for director at the 2000 Annual Meeting and certain officers
of the Company. The officers of the Company who are participants in this
solicitation include: Frederick W. Anton III, Chairman of the Board, John W.
<PAGE>
Smithson, President and Chief Executive Officer, Francis W. McDonnell, Senior
Vice President and Chief Financial Officer, and Albert D. Ciavardelli, Vice
President-Finance.
Certain Information Concerning Participants
- - -------------------------------------------
The security holdings of the directors, director nominees and officers who are
participating in this solicitation are available from the Company at the above
telephone number.
PMA Capital Corporation, headquartered in Philadelphia, Pennsylvania, is an
insurance holding company, whose operating subsidiaries provide specialty risk
management products and services to customers throughout the United States. The
primary product lines of PMA Capital's subsidiaries include: 1) property and
casualty reinsurance, underwritten and marketed through PMA Re; 2) managed care
workers' compensation, integrated disability and other commercial property and
casualty lines of insurance in the Mid-Atlantic and Southern regions of the
United States, underwritten and marketed under the trade name The PMA Insurance
Group; and 3) excess and surplus lines coverages, underwritten and marketed by
Caliber One.
